P R O G R E S S I V E C A L E N D A R 07.19.08
1. Peace walk 7.19 9am Cambridge MN
2. Rondo days 7.19 10am
3. NWN4P Mtka 7.19 11am
4. Radical cmty 7.19 1pm
5. Northtown vigil 7.19 2pm
6. Make green beer 7.19 2pm
7. Class on rights 7.19 5pm
8. Artcar 7.17 6pm
9. Hold cops true 7.19 9pm
10. Corey Walker - A kinder, gentler imperialism?
11. Mike Whitney - Eulogy for the ownership society
--------1 of 11--------
From: Ken Reine <reine008 [at] umn.edu>
Subject: Peace walk 7.19 9am Cambridge MN
every Saturday 9AM to 9:35AM
Peace walk in Cambridge - start at Hwy 95 and Fern Street
--------2 of 11--------
From: PRO826 [at] aol.com
Subject: Rondo days 7.19 10am
Rondo Days Grand Parade & Float Competition
Sat, July 19, 2008
Line-Up: 8:00 am - Start Time: 10:00 am
Start Location: St. Peter Claver Catholic Church
1060 W. Central Avenue, St. Paul, Minnesota
End Location: Martin Luther King Park - 270 N. Kent Street, St. Paul,
Minnesota The Grand Parade will start at 10am on Saturday, from St. Peter
Claver Church on Oxford Street and end at the festival grounds Martin
Luther King Park.
For more information contact the Rondo Days Hotline at (651) 646-6597 or
visit us at www.rondoaveinc.org
--------3 of 11--------
From: Carole Rydberg <carydberg [at] comcast.net>
Subject: NWN4P Mtka 7.19 11am
NWN4P-Minnetonka demonstration- Every Saturday, 11 AM to noon, at Hwy. 7
and 101. Park in the Target Greatland lot; meet near the fountain. We
will walk along the public sidewalk. Signs available.
--------4 of 11--------
From: andy <afahlstrom [at] riseup.net>
Subject: Radical community 7.19 1pm
Twin Cities Radical Community Meeting on Sexual Assault and the RNC
Saturday, July 19th
1-4 PM
Walker Library
2880 Hennepin Avenue
(Hennepin & Lagoon)
Minneapolis MN 55408
The RNC Welcoming Committee is asking for a meeting of all Twin Cities
radicals interested in working to combat rape culture and deal with sexual
assault within the context of the 2008 Republican National Convention.
Sexual assault happens every day. It happens within our own 'radical'
community and will happen during the RNC whether we are aware of it or
not. With the large influx of people into the twin cities around the RNC
it would be irresponsible not to plan for them as our cities play 'host'.
It is our hope that this meeting will be a space for folks of varying
levels of experience in dealing with these issues to converge and,
together, develop ways to address them as a community over the next weeks,
during the RNC, and beyond.
The RNC-WC is committed to the long-term work of dismantling rape culture,
but this is not something that can be accomplished by any single group of
people. While recognizing the need to do this work in our own group, we
seek to participate in a broader community struggle and our hope is that
this meeting will be a meaningful step in that process. (This discussion
will not be facilitated by the Welcoming Committee.) We are asking for
this meeting as members of the radical community and do not seek to direct
the conversation, only to start it.
--------5 of 11--------
From: Vanka485 [at] aol.com
Subject: Northtown vigil 7.19 2pm
Peace vigil at Northtown (Old Hwy 10 & University Av), every Saturday
2-3pm
--------6 of 11--------
From: Do It Green! Minnesota <Do_It_Green_Minnesota [at] mail.vresp.com>
Subject: Make green beer 7.19 2pm
All workshop participants for our July Eco Consumerism workshops will
receive a FREE BLUE SKY GUIDE!!!
ECO IMPACT OF BEER
Sat, July 19: 2-4pm
Twin Cities Green
2405 Hennepin Ave. S., Mpls
How green is your beer? Come to this workshop and compare the
eco-footprints of larger beer companies, microbreweries and home-brewing
and taste test some local brews. Expert brewers will also demonstrate how
to brew your own beer.
To RSVP for a workshop, please email info [at] doitgreen.org, call 612-345-7973
or visit www.doitgreen.org to register online. A suggested donation of $5
per workshop is payable online with registration or in person. We
appreciate your support!
--------7 of 11--------
From: Lydia Howell <lhowell [at] visi.com>
Subject: Class on rights 7.19 5pm
SAT. JULY 19TH FREE! KNOW YOUR RIGHTS Training
sponsored by the Experimental College
http://www.excotc.org/node/194
Name of Facilitators: Members of Communities United Against Police
Brutality (CUAPBD
Course Description: CUAPB is a grassroots organization which has worked to
eradicate police brutality for many years. CUAPB gladly offers Know Your
Rights Trainings which teach attendees how to safely and effectively deal
with police in a variety of settings and situations:
Class Time/Date: July 19th 5 p.m. "Know Your Rights"
Meeting Location: Basement of the Walker Community United Methodist
Church which is at 3104 16th Ave S, Minneapolis.
What experience do you bring to this class?
Members of CUAPB have trained each other on facilitating KYR Trainings.
Facilitators often have first-hand experience of the subject matter and
are friendly, concise, and open-minded educators and learners.
Syndicate content
--------8 of 11--------
From: Julie Bates <julie [at] intermediaarts.org>
Subject: Artcar 7.17 6pm
INTERMEDIA ARTS PRESENTS
The 14th Annual "Summer of ArtCar"
Intermedia Arts is pleased to present the ArtCars at a number of community
events and celebrations throughout the summer. Due to lack of funding,
the traditional parade will not take place this year. However, there are
still many opportunities to create, participate, and enjoy these
one-of-a-kind mobile creations. ArtCars, often humorous, are a symbol of
the right to freedom of expression and the yearning to express
individuality. ArtCars encourage people to express themselves on a daily
basis. These works of art open up dialogues and create community
connections. Every day is a parade when art comes out of the gallery and
rolls into your neighborhood!
Saturday, July 19, 6pm-10:30pm: Art hits the asphalt with the ArtCar
Cruise and Drive-in Movie! Head down to Lake of the Isles to watch the
cars cruise around the lake at from 6pm-8pm. Top off the night by heading
back to Intermedia Arts to check out the ArtCars up close, and join the
artists for food, fun, and a special drive-in movie at dusk.
There are three ways to make a gift to the ArtCar Parade:
Send a check to:
Intermedia Arts
ArtCar Parade Community Campaign
2822 Lyndale Ave. S
Minneapolis, MN 55408
Call: 612.871.4444
Online: http://www.intermediaarts.org/pages/join/donate.php?p=artcar
[Here's my solution to the lack of funding: Contact wealthy families and
corporations and inform them someone plans a dorky cartoon of them on an
Artcar - unless... (you get the idea). And while we're at it, no reason
not to go on and have them in the same way finance our schools, roads,
parks, libraries, etc. -ed]
--------9 of 11--------
From: Eric Angell <eric-angell [at] riseup.net>
Subject: Hold cops true 7.19 9pm
"Our World In Depth" cablecasts on MTN Channel 17 on Saturdays at 9pm and
Tuesdays at 8am, after DemocracyNow!. Households with basic cable may
watch.
Sat, 7/19, 9pm and Tues, 7/22, 8am "Holding Police Accountable" Interview
of Communities United Against Police Brutality organizer Michelle Gross.
Hosted by Eric Angell. (a repeat)
--------10 of 11--------
Getting Beyond the Either / Or Choice
A Kinder, Gentler Imperialism?
By COREY D. B. WALKER
CounterPunch
July 18, 2008
"Even those who do not share the views of the old generals and proconsuls
of the U.S. world empire (which were those of Democratic as well as
Republican administrations) will agree that there can be no rational
justification of current Washington policy in terms of the interests of
America's imperial ambitions. . . ."
-Eric Hobsbawm
Both major party presidential candidates have been sparring over the
focus, scope, and reach of the Bush Administration's self-proclaimed "War
on Terrorism". Each, in their own way, look to tweak the grand designs of
imperial power to properly and correctly align it with their particular
ideological proclivities and vision of American global hegemony.
Whether it is Senator McCain's continuation of the war in Iraq or Senator
Obama's intense focus on the theatre of conflict in Afghanistan (and
extending into Pakistan), both candidates have chosen not to challenge the
underlying foundational assumptions that have informed American foreign
policy and national security policy since the events of 11 September 2001.
Both candidates agree with the deeply flawed language and logic that our
nation is at "war". As military historian Sir Michael Howard opined
almost seven years ago, "[T]o use, or rather to misuse the term 'war' is
not simply a matter of legality, or pedantic semantics. It has deeper and
more dangerous consequences. To declare that one is 'at war' is
immediately to create a war psychosis that may be totally
counter-productive for the objective that we seek. It will arouse an
immediate expectation, and demand, for spectacular military action against
some easily identifiable adversary, preferably a hostile state; action
leading to decisive results". In this respect, Senator McCain will have
us "win" in Iraq and Senator Obama will have us "win" in Afghanistan.
While both campaigns have given lip service to the need for increased
diplomacy - Senator Obama much more so than his republican counterpart -
neither campaign has decided to make a decisive break with the
fundamentally flawed logic that has governed and continues to reign
supreme in American foreign policy circles. Indeed, neither candidate is
prepared to repudiate the flawed doctrine of massive military action as a
primary response to the challenges of rogue networks of stateless actors
who employ terroristic measures to achieve their ideological aims and
objectives.
In several significant ways, the foreign policy differences between the
two candidates can best be understood as two competing visions for the
enhancement and perpetuation of American imperialism.
After the events of 11 September 2001, the Bush regime decided to
formulate and implement a foreign policy that placed a premium on
unilateral military action in imposing the dictates of a renewed American
imperialism. Deliberation, debate, and diplomacy were jettisoned in
pursuing a global vision of unquestioned American supremacy that would
ensure the safety and security of the "homeland". Rehearsing the
discourse of impending threat, the current regime strategically reoriented
the American state - consolidated considerable power within the Executive
branch, deepened the politicization of the governmental bureaucracy,
significantly shifted and militarized foreign assistance, realigned
corporate interests with foreign military policy, among other things - to
domesticate and disseminate a "benign" imperialism always and already in
our own interests.
Initially supported by a majority of the American public and given
legitimacy by the mainstream intellectual class, the Bush regime's
imperialist vision no longer claims majority support or sufficient
legitimacy. But despite this loss of legitimacy and support, the
underlying principles continue to inform discussions of the proper aims
and goals of American foreign policy in this election cycle.
Whether war in Iraq or Afghanistan, whether the will to win or the
dedication to lead, whether little discussion or considered diplomacy,
this presidential election cycle reminds us that while the bellicose
imperialism of the Bush regime is entering its final days, American
imperialism will continue, albeit with a different set of actors.
And it is this imperialism that marginalizes alternative visions of
relations between sovereign nations and that imperils the prospects for a
global peace.
Martin Luther King, Jr. famously stated, "I want to say one other
challenge that we face is simply that we must find an alternative to war
and bloodshed. Anyone who feels, and there are still a lot of people who
feel that way, that war can solve the social problems facing mankind is
sleeping through a great revolution".
If we are to move beyond perpetual war to a planetary peace, we must
realistically recognize not only the limitations of military actions in
achieving social and political goals, but, more importantly begin to
critically examine and systematically disavow the imperialistic principles
and doctrines that guide and govern American foreign policy.
The challenge Americans face is not simply an either/or choice in that
grand low intensity spectator sport of national presidential elections.
Rather, the true challenge is not to remain asleep and complicit with the
further escalation of America's imperial ambitions in its new guise -
either reconfigured or with a velvet cover - but to wake up and continue
that great revolution that calls us to become more human and struggle for
a more humane existence.
Corey D. B. Walker is an assistant professor of Africana studies at Brown
University and the author of A Noble Fight: African American Freemasons
and the Struggle for Democracy in America, which will be published in
October.
--------11 of 11--------
Eulogy for the Ownership Society
Swan Song for Fanny Mae
By MIKE WHITNEY
CounterPunch
July 18, 2008
The Fed's emergency rescue plan for the financial markets is hopelessly
flawed. It's a scattershot approach that doesn't address the real source
of the problem; an unregulated, unsustainable structured finance system
that emerged in full-force after 2000 and spawned a shadow banking system
that creates trillions of dollars of credit without sufficient capital
reserves. This is the heart of the problem and it needs to be debated
openly. The present system doesn't work; it's as simple as that. It makes
no sense to provide trillions of dollars of taxpayer money to shore up a
system that is essentially dysfunctional. It's just throwing money down a
rat-hole.
The Federal Reserve and US Treasury want a blank check to prop up Fannie
Mae and Freddie Mac, the two war-horses of the mortgage industry, that
currently underwrite nearly 80 per cent of all new mortgages in the US.
But by any objective standard both of these GSEs are already insolvent.
Thus, the taxpayer is being asked to rescue a failed industry that has
been used for private gain so that speculators will not have to suffer the
losses. Even worse, Fannie and Freddie have written hundreds of billions
of dollars worth of mortgages that have not yet defaulted, but will
certainly default within the next two years. This is bound to batter the
already faltering economy.
The bad paper held by Fannie and Freddie are mortgages that were made to
unqualified applicants who are presently losing their homes in record
numbers. Their loans were approved because there was no functioning
regulatory body to oversee their issuance and because the mortgages were
transformed into complex securities that were sold to credulous investors
around the world. The ratings were fixed to meet the requirements of their
employers, the investment banks, which marketed these exotic bonds to
foreign banks, insurance companies and hedge funds. That puts Fannie and
Freddie at the center of a system that needs radical surgery to eradicate
the bad paper. If this doesn't happen in a timely fashion, then foreign
investors will stop purchasing US debt and the dollar will crash. By
creating a backstop for Fannie and Freddie, the Fed is linking US
sovereign debt with mortgages and derivatives that are already known to be
fraudulent. This is a big mistake. According to Merrill Lynch, the US is
already facing a long-term "financing crisis" as the weakening US economy
and sluggish consumer spending could signal an end to the $700 billion in
foreign investment that covers America's current account deficit. By
assuming the GSE's enormous debts, the Bush administration is just
speeding this process along and inviting disaster.
Treasury Secretary Henry Paulson has been intentionally oblique about the
implications of the proposed bailout. On Tuesday, he delivered a statement
in front of the massive stone columns of the Department of the Treasury, a
towering monolith that arouses feelings of confidence in rock-solid
institutions. He made it clear that Fannie Mae and Freddie Mac would have
the "explicit" backing of the US government:
"First, as a liquidity backstop, the plan includes a temporary increase in
the line of credit the GSEs have with Treasury. Treasury would determine
the terms and conditions for accessing the line of credit and the amount
to be drawn.
Second, to ensure the GSEs have access to sufficient capital to continue
to serve their mission, the plan includes temporary authority for Treasury
to purchase equity in either of the two GSEs if needed.
Third, to protect the financial system from systemic risk going forward,
the plan strengthens the GSE regulatory reform legislation currently
moving through Congress by giving the Federal Reserve a consultative role
in the new GSE regulator's process for setting capital requirements and
other prudential standards."
It was an impressive performance from a public relations point of view,
but it didn't fool anyone on Wall Street. What Wall Street wants is
details not blather. Paulson gave no specifics about how much money the
government would provide or what the nature of the new relationship would
be; conservatorship, recievorship, nationalization? What is it?
The truth is that Paulson was deliberately vague because he and friend
Bernanke would like to have it both ways; they'd like to provide a
liquidity backstop and an endless line of credit for the two GSE's without
formally nationalizing them. That would avoid the further dilution of
stock values while keeping the US government from taking another $5
trillion of mortgage debt onto their balance sheet. It is a delicate
balancing act, but Paulson seems to think he carried it off. He's wrong,
though, and volatility in the stock market proves it. Investors are
clearly skittish about the new arrangement. They want to know the facts
about the government's commitment. Paulson is discovering that deceiving
investors is not as easy as duping the public about fictional WMD or Niger
uranium. Sometimes even the dullest person can grasp the most complex
matters when it comes to his own money.
Fannie and Freddie have been insolvent for ages, but it hasn't stopped
lawmakers from pushing the envelope and loading more debt on their balance
sheets. Here's how Barron's summed it up more than six months ago:
"Fannie's balance sheet is larded with soft assets and understated
liabilities that would leave the company ill-equipped to weather a serious
financial crisis. And spiraling mortgage defaults and falling home prices
could bring a tsunami of credit losses over the next two years that will
severely test Fannie's solvency.
But, if the truth be known, a considerable portion of Fannie's losses also
came from speculative forays into higher-yielding but riskier mortgage
products like subprime, Alt-A (a category between subprime and prime in
credit quality) and dicey mortgages requiring monthly payments of interest
only or less. For example, Fannie's $314 billion of Alt-A - often called
liar loans because borrowers provide little documentation - accounted for
31.4% of the company's credit losses while making up just 11.9% of its
$2.5 trillion single-family-home credit book. Fannie was clearly looking
for love - and market share - in some of the wrong places."
Rampant speculation, risky investments, and Enron-type accounting; hardly
the stuff of solid portfolios. That's why the two mortgage giants are
stumbling headlong towards oblivion despite the Treasury's panicky relief
operation. By last Friday Fannie's stock had fallen 47 per cent while
Freddie was down 50 per cent. The public may still be in the dark about
what is going on, but investors have a pretty good grip on the situation;
they can see the great birds are already circling overhead and its just a
matter of time before they descend on their prey. Paulson's attempts to
muddy the water have amounted to nothing. The fact remains that the two
biggest mortgage-lenders in the world are busted and last week's stock
sell-off was tantamount to a run on the country's largest bank. Paulson's
statement was really nothing more than a eulogy for the mortgage industry;
a few heartfelt words over the rigid corpse of a close friend.
When the housing market started to tumble and Wall Street's
"securitization" model froze-up, Fannie had to take the lion's share of
the mortgages to keep the real estate market hobbling along. In a two year
period, between the housing peak in 2005 and 2007, Fannie went from
roughly 40 per cent of the market to about 80 per cent. The Congress even
enlarged the size of the mortgages they could underwrite from $417,000 to
over $700,000. The prospect of bankruptcy never diminished congress's
generosity.
Fannie and Freddie currently own or underwrite roughly half of the
nation's $12 trillion mortgage market. Basically, every home mortgage
lender depends on them for financing. Their shares are owned by individual
investors and banks around the world. Foreign investors have always
believed that the GSE bonds were as risk-free as US government Treasuries.
Now they are beginning to wonder. (Foreign central banks, led by China and
Russia, hold at least $925 billion in U.S. agency debt, including bonds
sold by Freddie and Fannie, according to official U.S. statistics)
Whatever happens to Fannie, the loss of investor confidence will send long
term interest higher as investors demand bigger returns for the risk
they're taking on GSE bonds. That'll put a straitjacket on home sales
which are already flagging from soaring inventory and falling prices.
Higher rates could bring the whole housing market to a standstill.
The Fed's cheap credit policy under Greenspan created an artificial demand
for housing which ballooned into the biggest equity bubble in history. Low
interest rates are a subsidy which naturally lead to speculation and
asset-inflation. At a certain point, however, the endless debt-pyramiding
reaches its apex and the whole mechanism switches into reverse. Now the
economy has entered deleveraging-hell where everything is primal blackness
and the gnashing of teeth, the flip-side of speculative rapture.
By some estimates, Freddie Mac has a negative net-worth of $17 billion.
It's basically insolvent, although Paulson would like to see the charade
go on a while longer. Investors purchased another $3 billion of the two
GSEs last Monday, but the appetite for failing bonds is diminishing?
What's certain is that the collapse of Fannie and Freddie would be a
watershed event and a mortal blow to the US financial system. $5 trillion
in shaky mortgage-debt can't be easily swept under the rug and ignored.
Interest rates on everything would quickly rise; credit would become
scarcer, economic growth would shrivel, unemployment would soar, and the
dollar will plummet. As the two mortgage giants continue to get whipsawed
by higher priced capital and waning investment, US government debt will
likely to lose its much-vaunted triple A credit rating. On Friday, credit
default swaps on government debt doubled, a sign that investors are losing
confidence that the US will be able to manage its twin deficits or pay off
its debts. It's the end of the road for Washington's free lunch throng and
for a paper dollar that isn't backed by much of anything except music
videos, fast food and smart-bombs.
PAULSON'S POWER GRAB
What Paulson is really wants is for congress to allow the Fed to regulate
the financial system without congressional oversight. Paulson's so-called
blueprint for financial regulation is a blatant power-grab meant to expand
the authority of the banking oligarchy giving them unlimited power over
the markets. Journalist Barry Grey sums it up like this in his article on
"US Bailout of Mortgage Giants: The politics of plutocracy":
"The plan outlined by Treasury Secretary Henry Paulson would give him
virtually unlimited and unilateral authority to pump tens of billions of
dollars of public funds into the mortgage finance companies. At the same
time, the Federal Reserve Board announced that it would allow the
companies to directly borrow Fed funds... The Democrats...now march in
lockstep with the minority party to rush through laws demanded by Wall
Street... The buying of legislators and their votes by corporate interests
is carried out openly and shamelessly. Members of Frank's House Financial
Services Committee received over $18 million from financial services,
insurance and real estate firms this year. Frank himself raised over $1.2
million, almost half of which came from finance and related
industries...Senator Dodd's top contributor in the 2003-2008 election
cycle was Citigroup, followed by SAC Capital Partners. He raised $4.25
million from securities and investment firms. Senator Schumer's top
contributor was likewise Citigroup. He raised $1.4 million from securities
and investment firms, his most lucrative corporate sector."
The smell of political corruption is overpowering, and yet, the plan is
moving forward regardless. Even if Paulson's plan worked in the short
term, the damage would be enormous. It would place the country's
regulatory powers and purse-strings in the hands of the same amoral
banksters who created this mess to begin with. It is the fast-track to
corporate feudalism on a nationwide scale.
PITFALLS FOR THE GSEs
The biggest problem facing Fannie and Freddie is that wary investors will
not roll over the debt of the two companies which will precipitate a
collapse. This is where it pays to have people who can be trusted in
positions of power. Henry Paulson is the worst thing that ever happened to
the US Treasury. Paulson is to finance capitalism what Rumsfeld is to
military strategy. To say that Paulson is lacking in credibility is an
understatement. Nothing he says can be taken at face-value. When Paulson
says "the worst is behind us" or the "subprime crisis is contained" or the
Bush administration "supports a strong dollar policy"; most people know it
is a fabrication. Besides, Paulson is completely out of his depth in the
present crisis. His appearances on TV, with the beads of sweat glistening
on his forehead, and his foolish repetition of the same stale mantra is
eroding confidence in the financial system and sending waves of panic
rippling through Wall Street. Enough is enough. He needs to go.
If the administration was serious about changing direction they would dump
Paulson and reinstate Paul Volcker. Whatever one thinks about Volcker, his
presence would calm the markets and send a message that the adults were
back in charge. But that won't happen. The Bush team still thinks they can
finesse their way through the thicket of investor skepticism. That means
that catastrophe is inevitable as more and more investors pick up their
bets and head for the exits.
TIME IS RUNNING OUT
Whatever the administration decides to do; time is short and they have one
chance to get it right. The Treasury needs to find a way to ring-fence the
garbage bonds and pray that the investing public won't dump their holdings
in a panic run on the market. Either way, it's a gamble and there's no
guarantee of success. The Wall Street Journal outlined the doomsday
scenario if Paulson's plan fails:
"Falling house prices and nonpaying homeowners cause the value of the
trillions of dollars in outstanding debt held by these
government-sponsored enterprises (Fannie and Freddie) to plunge. Many
banks have balance sheets stuffed full of this paper. They face huge
losses, which some can't survive. They and other investors, such as
foreign central banks, then dump the GSE paper.
Fannie and Freddie would end up unable to lend, or at least to take up
anything like their current 80% share of the U.S. mortgage market, further
punishing the reeling housing market. This would add another twist to the
spiral of falling prices, credit losses and failing lenders.
What should they do? First, devise a plan - and fast. There is no time to
dither." (Wall Street Journal)
If foreign banks and investors ditch their GSE debt; it will send
shockwaves through the global economy. But if the Treasury provides
unlimited funding for a sinking operation, it's likely to trigger a
sell-off of the dollar. It's a lose-lose situation. For now, bond holders
are sitting-tight even though the stock is tanking, but for how long?
They've already been taken to the cleaners on hundreds of billions of
dollars of mortgage-backed garbage; now there are rumors that the US
government won't back agency debt. What kind of shabby shell-game is the
US playing anyway?
New York Times:
"If people lose faith in Fannie and Freddie, then the whole system freezes
up, and nobody can buy a house, and the entire housing market can crash,"
said Paul Miller of the Friedman, Billings, Ramsey Group in Arlington, Va.
"There's a fine line between having faith and losing it, and sometimes
it's unclear when it has disappeared. But when investors cross that line,
bad things happen very quickly".
And it affects more than the housing market, too. The bond and equities
markets are handcuffed to real estate and they're already listing from the
slowdown in investment. The Fed thought they could keep the whole mess
from going sideways by opening up "auction facilities" where the banks
could get low interest capital in exchange for their mortgage-backed junk.
But the banks have curtailed their lending and there's bigger trouble
ahead. Bridgewater Associates issued a warning last week that losses to
the banking system would exceed $1.6 trillion, four times original
estimates and enough to crash the entire banking system. So far, banks
have only written down $450 billion, which means that they are only 25 per
cent of the way through the current credit storm. Defaults are liable to
skyrocket as hundreds of undercapitalized banks turn to a grossly
underfunded FDIC ($52 billion in reserves) to cover the losses of their
depositors. The prospect of a humongous taxpayer bailout seems nearly
unavoidable.
What's most disturbing is that nothing has been done to restore the
markets to a functional model. The Fed's strategy is still to try to keep
the relatively new "structured finance" model (with all its bizarre-named
debt instruments and derivatives) in place even though it failed its first
stress-test and has demonstrated that it cannot withstand even moderate
downward movement in the market. The current model is kaput; there needs
to be a Plan B or the Fed is just wasting its time.
Fannie's demise comes at a particularly difficult time for the banking
system. According to a report by Paul Kasriel, Chief Economist at Northern
Trust:
"The sharpest 13-week contraction in bank credit since data were first
available in 1973. Banks simply don't have the capital on hand to avail
themselves of the cheap credit the Fed is offering to fund them
at......This is what it means to be in a "credit crunch". Banks have
suffered hundreds of billions in losses, forcing them to pull credit out
of the economy. Every time you read an article about banks cutting credit
lines, exiting lending businesses, or eliminating mortgage products it
represents more bank credit drying up." (Option Armageddon, "Understanding
Bernanke")
Bank credit is drying up because the capital is being destroyed (from
foreclosures and downgraded assets) faster than anytime in history. We are
just now feeling the first stiff breezes from a Force-5 deflationary
hurricane set to touch down in 2009. Fannie and Freddie are teetering
towards insolvency while the country is entering the most vicious downward
cycle since the Great Depression. Higher interest rates, negative home
equity, mounting credit card debt, auto loan debt, commercial real estate
debt and tightening lending standards will only curtail consumer spending
more putting greater pressure on the dollar.
The Fed will have to be selective; not everything can be saved.
Significant parts of the financial system will be reduced to ashes. It
would be wiser to clear the brush away from as many of the solvent
institutions as possible and prepare for the worst. Otherwise, the whole
system is at risk of contagion. Hundreds of local and regional banks are
expected to go under. (the average small bank has 67% of its assets in
real estate) It can't be avoided. They are holding too much bad paper and
no way to make up for the losses. They're following the same path as the
250 mortgage lenders that vaporised in the subprime meltdown. They
couldn't be saved either.
The bigger investment banks are in trouble too. That's why the SEC has
finally decided to act as a regulator and go after short-sellers:
"The Securities and Exchange Commission announced an emergency action
aimed at reducing short-selling aimed at Wall Street brokerage firms,
Fannie Mae and Freddie Mac, and will immediately begin considering new
rules to extend new requirements to the rest of the market."
The SEC never took an interest in naked shorting of stocks (or commodities
speculators) while its fat-cat friends in the big brokerage houses were
raking in billions. Now that many of these same institutions, including
Fannie Mae and Freddie Mac, are in the crosshairs, SEC chief Christopher
Cox is rushing to their rescue. It is utter duplicity, but it illustrates
an important point; the system is cannibalizing itself just like Karl Marx
predicted over 100 years ago. Unchecked greed is inevitably
self-destructive.
A growing number of market analysts are beginning to notice the storm
clouds forming on the horizon. The Royal Bank of Scotland has advised
clients to brace for a full-fledged crash in global stock and credit
markets over the next three months. The Bank of international Settlements
(BIS) made a similarly ominous warning that the credit crisis could lead
world economies into a crash on a scale not seen since the 1930s. The bank
suggests that government officials and market analysts have not fully
grasped the financial turmoil that could result from the mortgage crisis
and its effects of the global economic system. The body points out that
the Great Depression was not anticipated because people ignored the
implicit danger of "complex credit instruments, a strong appetite for
risk, rising levels of household debt and long-term imbalances in the
world currency system."
Ron Paul (R-Texas) is one of the few members of congress who has shown
that he has a grasp of the impending economic disaster now facing the
country if corrective action is not taken swiftly. In a speech he gave
last week on the floor of the House, he said:
"There are reasons to believe this coming crisis is different and bigger
than the world has ever experienced...The financial crisis, still in its
early stages, is apparent to everyone: gasoline prices over $4 a gallon;
skyrocketing education and medical-care costs; the collapse of the housing
bubble; the bursting of the NASDAQ bubble; stock markets plunging;
unemployment rising;, massive underemployment; excessive government debt;
and unmanageable personal debt. Little doubt exists as to whether we'll
get stagflation. The question that will soon be asked is: When will the
stagflation become an inflationary depression? "
The troubles at Fannie and Freddie are symptomatic of more deeply rooted
problems related to abusive lending and the unsustainable expansion of
credit. We've now reached our debt limit and the bills must be repaid or
written off. The Bush administration is hoping to reflate the bubble by
(stealthily) recapitalizing the GSEs, but it won't be easy. As one blogger
put it, we have reached "peak credit" and have nowhere to go except down.
Economist Michael Hudson summed it up like this:
"The reality is that Fannie, Freddie and the FHA gave a patina of
confidence to irresponsible lending and outright fraud. This confidence
game led them to guarantee some $5.3 trillion of mortgages, and to keep
$1.6 trillion more on their own books to back the bonds they issued to
institutional investors."
It was a scam of Biblical proportions and now it is all starting to
unravel. Bush's "ownership society" was a cheap parlor trick engineered by
the Fed's low interest rates to trigger massive speculation and shift
wealth from one class to another. Now, the housing bubble has crashed and
the excruciating reality of insolvency is beginning to sink in.
Michael Hudson, again:
"All one hears is a barrage of claims that the government must preserve
the financial fictions of Fanny Mae and Freddie Mac in order to 'save the
market.' The usual hypocrisy is being brought to bear claiming that all
this is necessary to 'save the middle class,' even as what is being saved
are its debts, not its assets...The 'way of life' that is being saved is
not that of home ownership, but debt peonage to support the concentration
of wealth at the top of the economic pyramid.
Mortgages are the major debts of most American families. In this role,
real estate debt has become the basis for the commercial banking system,
and hence the basis for the wealthiest 10 percent of the population who
hold the bottom 90 percent in debt. That is what Fannie Mae, Freddie Mac
and "the market" are all about." (Michael Hudson; "Why the Bail Out of
Fannie Mae and Freddie Mac is Bad Economic Policy", counterpunch.org)
The housing boom never had anything to do with Bush's Utopian-sounding
"ownership society". It was always just a swindle to enrich the banking
establishment and divert middle class wealth to ruling class elites.
Mike Whitney lives in Washington state and can be reached at
fergiewhitney [at] msn.com
[I say let's make the rich pay ALL the cost - let's cheer when they lose
their private jets and yachts and mansions and are out on the street
begging; let's yell at them 'Get a job!, and let's smile and laugh and
dance! And if they want to jump, let's all add a little push here.. and
there.. and here.. and there.. -ed]
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- David Shove shove001 [at] tc.umn.edu
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